MASCARIÑAS, DEAN PHOEBE MARGARET M.

ASSSIGNEMNT 1

G.R. No. 59255 December 29, 1995

OLIVIA M. NAVOA and ERNESTO NAVOA, petitioners,

vs.
COURT OF APPEALS, TERESITA DOMDOMA and EDUARDO DOMDOMA, respondents.

FACTS:

Private respondents filed for collection of various sums of money with RTC Manila based on
loans obtained by the petitioners. Consequently, petitioners moved to dismiss the complaint for
not having stated a cause of action and because the plaintiffs had no capacity to sue. RTC
dismissed the case and denied the motion for reconsideration. Upon appeal, the Court of
Appeals returned the records of the case for trial on its merits.

Petitioners submit that private respondents failed to specify in their complaint a fixed period
within which petitioners should pay their obligations; that instead of stating that petitioners failed
to discharge their obligations upon maturity private respondents sought to collect on the checks
which were issued to them merely as security for the loans; and, that private respondents failed
to make a formal demand on petitioners to satisfy their obligations before filing the action.

ISSUE:

Whether or not the case should be dismissed for want of a cause of action.

RULING:

No. All the loans granted to petitioners are secured by corresponding checks dated a month
after each loan was obtained. In this regard, the term security is defined as a means of ensuring
the enforcement of an obligation or of protecting some interest in property. It may be personal,
as when an individual becomes a surety or a guarantor; or a property security, as when a
mortgage, pledge, charge, lien, or other device is used to have property held, out of which the
person to be made secure can be compensated for loss. Security is something to answer for as
a promissory note. That is why a secured creditor is one who holds a security from his debtor for
payment of a debt. 

From the allegations in the complaint there is no other fair inference than that the loans were
payable one month after they were contracted and the checks issued by petitioners were drawn
to answer for their debts to private respondents.

Petitioners failed to make good the checks on their due dates for the payment of their
obligations. Hence, private respondents filed the action with the trial court precisely to compel
petitioners to pay their due and demandable obligations. Art. 1169 of the Civil Code is explicit —
those obliged to deliver or to do something incur in delay from the time the obligee judicially or
extrajudicially demands from them the fulfillment of their obligation. The continuing refusal of
petitioners to heed the demand of private respondents stated in their complaint unmistakably
shows the existence of a cause of action on the part of the latter against the former.
MASCARIÑAS, DEAN PHOEBE MARGARET M.
ASSSIGNEMNT 1

G.R. No. L-19190             November 29, 1922

THE PEOPLE OF THE PHILIPPINE ISLANDS, plaintiff-appellee,

vs.
VENANCIO CONCEPCION, defendant-appellant.

FACTS:

By telegrams and a letter of confirmation to the manager of the Aparri branch of the Philippine
National Bank, Venancio Concepcion, President of the Philippine National Bank authorized an
extension of credit in favor of "Puno y Concepcion, S. en C." in the amount of P300,000. This
special authorization was essential in view of the memorandum order of President Concepcion
limiting the discretional power of the local manager at Aparri, Cagayan, to grant loans and
discount negotiable documents to P5,000, which, in certain cases, could be increased to
P10,000. Pursuant to this authorization, credit aggregating P300,000, was granted the firm of
"Puno y Concepcion, S. en C.," the only security required consisting of six demand notes. Puno
y Concepcion, S. en C." was a copartnership capitalized at P100,000. Of which P50,000 was
contributed by Venancio’s wife Rosario San Agustin.

Venancio was charged and found guilty in CFI Cagayan for violation of section 35 of Act No.
2747 which states: "The National Bank shall not, directly or indirectly, grant loans to any of the
members of the board of directors of the bank nor to agents of the branch banks." 

ISSUES:

1. Whether or not the granting of a credit of P300,000 to the copartnership "Puno y

Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National
Bank, a "loan" within the meaning of section 35 of Act No. 2747.
2. Whether or not the granting of a credit of P300,000 to the copartnership "Puno y
Concepcion, S. en C.," by Venancio Concepcion, President of the Philippine National
Bank, a "loan" or a "discount".
3. Whether or not the granting of a credit of P300,000 to the copartnership, "Puno y
Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National
Bank, an "indirect loan" within the meaning of section 35 of Act No. 2747.
4. Whether or not the granting of a credit of P300,000 to the copartnership "Puno y
Concepcion, S. en C." by Venancio Concepcion, President of the Philippine National
Bank, in violation of section 35 of Act No. 2747, penalized by this law.

RULING:

1. Yes. The exhibits in question speak of a "credito" (credit) and not of a " prestamo" (loan).
The "credit" of an individual means his ability to borrow money by virtue of the
confidence or trust reposed by a lender that he will pay what he may promise. A "loan"
means the delivery by one party and the receipt by the other party of a given sum of
money, upon an agreement, express or implied, to repay the sum loaned, with or without
MASCARIÑAS, DEAN PHOEBE MARGARET M.
ASSSIGNEMNT 1

interest. The concession of a "credit" necessarily involves the granting of "loans" up to

the limit of the amount fixed in the "credit."

2. It was a loan because (1) In a discount, interest is deducted in advance, while in a loan,
interest is taken at the expiration of a credit; (2) a discount is always on double-name
paper; a loan is generally on single-name paper. The demand notes signed by the firm
"Puno y Concepcion, S. en C." were not discount paper but were mere evidences of
indebtedness, because (1) interest was not deducted from the face of the notes, but was
paid when the notes fell due; and (2) they were single-name and not double-name
paper.

3. It is an indirect loan. The prohibition against indirect loans is a recognition of the familiar
maxim that no man may serve two masters — that where personal interest clashes with
fidelity to duty the latter almost always suffers. If, therefore, it is shown that the husband
is financially interested in the success or failure of his wife's business venture, a loan to
partnership of which the wife of a director is a member, falls within the prohibition.

4. Yes. It is argued that the prohibition contained in section 35 of Act No. 2747 is on the
bank, and since section 49 of said Act provides a punishment not on the bank when it
violates any provisions of the law, but on a person violating any provisions of the same,
and imposing imprisonment as a part of the penalty, the prohibition contained in said
section 35 is without penal sanction. It must be noted that when the corporation itself is
forbidden to do an act, the prohibition extends to the board of directors, and to each
director separately and individually.